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NJ Daily / OUTLOOK

The Insider’s Guide to the New Session

Unhallowed halls: This year’s agenda looks to be relentlessly political.(AP Photo/Susan Walsh)

January 22, 2012

Little is trendier in Washington than talking about how broken Congress is. This won’t be the year Congress does anything to change that.

The parties’ 2012 agendas share little but a relentless electoral focus. Republicans and Democrats will use the House and Senate floors mostly to advance so-called jobs bills that will not see the light of day in the other chamber but aim to boost their respective parties’ electoral prospects.

Plans by Senate Majority Leader Harry Reid, D-Nev., to work with the White House on an agenda to prompt GOP obstruction, which Democrats will link to its likely presidential nominee, Mitt Romney, highlight how focused congressional leaders are on influencing the presidential race.

 

This means 2012 will look a lot like last fall, when Democrats pushed President Obama’s jobs proposal, in whole and then pieces, and attacked Republicans for filibustering it. Remaining provisions, like helping states hire and retain teachers and first responders and a plan to boost infrastructure spending, could return to the Senate floor.

However, Democrats don’t seem intent on actually passing those measures, as Sen. Chuck Schumer of New York, who heads Senate Democrats’ policy and messaging shop, insists they will propose funding those bills with surtaxes on incomes of more than $1 million. That ensures Republican opposition—and an opportunity to bash Republicans for “protecting millionaires at the expense of the middle class.”

An immigration-policy overhaul bill—designed to force Romney to oppose something independents, Latinos, and business groups likely will support—could be on tap. Democrats are also eyeing renewable-energy-related legislation, which Democratic aides say is popular and could be effective politically if gas prices skyrocket this summer.

Although the year will probably produce few actual laws, Congress will likely start with a relative burst of legislative activity. Senate Democrats on Friday announced a long-awaited agreement to reauthorize the Federal Aviation Administration. The deal paves the way for finalization of an FAA bill years in the making.

A deal to extend the payroll-tax holiday for another nine or 10 months is expected ahead of next month’s expiration. GOP leaders signaled they will not pick a major fight on this issue, which they see as a political loser. Rank-and-file Republicans, battered in last month’s debate, may be more amenable to their leaders’ wishes this time. Congress could also pass a Transportation Department bill ahead of the March 1 deadline.

Led by Speaker John Boehner of Ohio, House Republicans will focus on presenting a more unified front—eventually in concert with the GOP nominee—to push back and attack Obama’s policies.

“If you look at this election that’s coming up, it’s pretty clear it’s going to be a referendum on the president’s policies regarding our economy,” Boehner said on Friday at an issues retreat in Baltimore. Boehner said he will push his committee chairs to aggressively scrutinize the Obama administration, particularly on the regulatory front. As for the Democratic-led Senate, “maybe, just maybe, they can get out of the way,” Boehner said, pointing out that the House has passed more than 30 jobs-related bills that the Senate hasn’t considered.

Majority Leader Eric Cantor of Virginia told his colleagues in Baltimore that 2011 showed “progress must be more incremental than some of us would have liked. To implement our policies, we have a lot of work to do. To win this election, to implement our agenda, we’ve got to lay out our vision in a way that people understand.”

Such efforts to go on the offensive will begin as early as Wednesday morning, the day after the State of the Union address, when the House Energy and Commerce Committee hears testimony from a State Department official regarding the president’s denial of a permit for the Keystone XL pipeline project.

ENERGY AND ENVIRONMENT

Dems on Defensive

Republicans have no intention of relenting on the Keystone issue until they run out of options or force Obama to approve the pipeline project.

“We are absolutely committed—as a Republican team—to keep the Keystone XL pipeline on the front burner,” House Energy and Commerce Chairman Fred Upton, R-Mich., said from Baltimore on Friday.

Incensed at Obama’s Keystone rejection, Republicans are mulling legislative ways to take power away from the executive branch and give it to either the Federal Energy Regulatory Commission or Congress, even though President George W. Bush gave that authority to the State Department in a 2004 executive order. Republicans may again try to attach such measures to the payroll-tax package.

Democrats will also play defense with Environmental Protection Agency regulations that Republicans have vowed to roll back. Senate Environment and Public Works ranking member James Inhofe, R-Okla., said he will file a disapproval resolution as soon as the Senate returns this week that would nullify a new EPA standard for power plants. Unlikely to pass, it will put vulnerable incumbents seeking reelection—such as Sen. Scott Brown, R-Mass.—in awkward positions. The House already voted to significantly delay that rule.

Republicans may try to do the same to upcoming mercury standards for boilers, an effort that has more bipartisan support. That rule will become final in April, so Republicans may try attaching it to the payroll-tax package as well. EPA will soon roll out its first standards requiring power plants to regulate greenhouse-gas emissions linked to climate change. Republican pushback on that front is also expected.

On Senate Democrats’ green-jobs front, one measure ripe for consideration is legislation that would promote electrical vehicles, which has bipartisan backing. Obama is likely to tout electrical vehicles—and his administration’s tougher fuel-economy standards—in Tuesday’s State of the Union speech.

In that same vein, House GOP leaders vowed to bring to the floor legislation that would fund new infrastructure projects by expanding domestic oil and gas production. Such a measure has no real chance of being considered by the Senate, which Republicans think will hurt Democrats politically.

FINANCIAL SERVICES

Whither Dodd-Frank?

Republicans, particularly in the House, will continue questioning and attempting to dismantle the Dodd-Frank financial-reform law. They hope to stall or change numerous elements by pressuring regulators or advancing legislation, which has no shot of enactment, that could gain steam in 2013 if Republicans win control of the Senate.

Topping the list: the Consumer Financial Protection Bureau. Republicans will contest Director Richard Cordray’s installment through a recess appointment last month. Republicans plan to aggressively challenge the legitimacy of that appointment and will have their first opportunity to grill Cordray when he testifies on Tuesday at a House Oversight and Government Reform subcommittee hearing led by Rep. Patrick McHenry, R-N.C.

Republicans want to restrain the bureau’s power by subjecting it to the appropriation process. They also want to make it easier for banking regulators to overrule its actions and to dilute its centralized power by creating a board to oversee it instead of a director.

Any move that the agency makes will be scrutinized by critics who argue the bureau will constrict credit and hurt the economy.

Democrats who fought for the agency have as much interest in ensuring the bureau is living up to its ambitious goals of simplifying credit offerings and protecting consumers from a variety of products and services like student loans, payday loans, mortgages, and overdrafts.

Derivatives regulations are also on the agenda. The House Agriculture Committee plans to dig into it starting this week with consideration of a host of bills that would expand exemptions in the law and force the Commodity Futures Trading Commission to jump through additional hoops when conducting cost-benefit analyses that would make it harder to adopt final rules.
A bipartisan group of lawmakers also want to alter a mortgage proposal stemming from the Dodd-Frank Act that could require 20 percent down payments on a certain segment of mortgages. The so-called “qualified residential mortgage” proposal is supposed to be decided by regulators this year, and many lawmakers are pressuring them to remove the requirement, arguing it would put home-buying out of reach for many.

Another item on the agenda is the complicated “Volcker Rule,” named for former Federal Reserve Board Chairman Paul Volcker, who fought for the reform. It bans banks from investing in proprietary trading or owning hedge funds or private equity. But carrying out the standard has been complicated for regulators, and the financial-services industry is fighting hard to water it down.
One non-Dodd-Frank item on the agenda is flood insurance. The national program expires this year. A series of short-term extensions have continued the National Flood Insurance Program since September, but both the House and Senate continue to wrestle with longer-term reauthorization bills that also overhaul the program.

HEALTH CARE

Bitter Pills

Congress starts off 2012 on health policy much like it ended it: scrambling to find a place where Democrats and Republicans can agree to cut at least $21 billion in order to put off a scheduled 27 percent pay cut to Medicare doctors past the presidential election.

After failing to reach an agreement at the end of 2011 on the so-called “doc fix” and extending a payroll-tax credit, lawmakers punted the decision for two months. Now that the winter recess and party retreats are finished, Congress has less than six weeks to figure out a bipartisan way to cover the cost of the doc fix.

House Republicans passed their own bill at the end of 2011 with a two-year freeze on pay for Medicare physicians, funded by $38 billion in cuts to the 2010 health reform law and hospitals. Those cuts were unacceptable to Democrats on the Senate Finance Committee, and the bill was never considered in the upper chamber.

After Congress’s perennial Medicare pay problem is resolved, the biggest item in health policy on Capitol Hill is the reauthorization of multibillion-dollar fee programs for the Food and Drug Administration. The programs—known as the Prescription Drug User Fee Authorization, or PDUFA, and the Medicare Device User Fee Reauthorization, or MDUFA—both expire in September.

FDA and representatives of the prescription-drug industry sent a negotiation to Congress earlier this month, putting them on track for a spring markup on Capitol Hill. But the medical-device industry and FDA are still squabbling over how much to raise the fees, and they missed a Jan. 15 deadline for submitting a plan to Congress.

Due to the acrimonious political environment on Capitol Hill, lawmakers want to move the big PDUFA and MDUFA bills in one package, in hopes of easing their passage and getting them done before the presidential election freezes all hope for bipartisanship. But the delay on the medical-device agreement has some experts nervous that the process won’t happen on time. If the user-fee programs are not reauthorized before they expire, FDA will likely have to lay off or furlough employees who approve drugs and devices.

Beyond the “UFAs,” Congress will likely attempt to deal with the automatic cuts scheduled for 2013, thanks to the deficit super committee’s failure to find $2.1 trillion in savings at the end of 2011. Without action from Congress, Medicare will take a 2 percent haircut, and nondefense programs—including the National Institutes of Health, the Centers for Disease Control and Prevention, and FDA—will see more than $50 billion in cuts.

HOUSING

Taming the GSEs

The big unfinished financial-services business from the last Congress was mortgage-finance overhaul, and both the House Financial Services Committee and Senate Banking Committee are expected to dedicate much of the year to debating this issue.

With elections around the corner, no consensus on what to do, and a fragile housing market, the White House is not expected to choose and push a path toward reforming the government-sponsored enterprises Fannie Mae and Freddie Mac, however.

The two GSEs provide the bulk of the country’s mortgage credit but are stuck in conservatorship limbo, meaning Congress cannot ignore the issue. The companies were seized by the government in 2008 to prevent their collapse and have received $169 billion—and counting—from taxpayers.

House Republicans pledged to end the bailout as part of their 2010 election platform. Many feel they must press ahead. Rep. Scott Garrett, R-N.J., the Financial Services Committee’s capital markets subcommittee chairman, hopes to wrap up GSE overhaul legislation this year. He has pushed several targeted bills that chip away at Fannie and Freddie through the committee but is trying to build consensus among a divided conference as to how to fully privatize the mortgage market.

Rep. Jeb Hensarling, R-Texas, also has long advocated legislation to phase out Fannie and Freddie, but many members question whether mortgages will remain affordable without some kind of government backstop.

The powerful mortgage and real estate industries oppose any change that eliminates all government guarantees. And no consensus exists among committee Republicans.

Garrett and Hensarling are up against GOP Reps. John Campbell and Gary Miller of California, who have proposed alternatives that would provide government support but through different mechanisms.

Still, Republican leadership would like to push some kind of GSE overhaul through the House this year.

The Senate Banking Committee has held several hearings on the issue but is far from consensus, and Chairman Tim Johnson, D-S.D., has taken a cautious approach. He is waiting for cues from the administration and does not want to take any action that could further destabilize the housing market.

NATIONAL SECURITY

Unfinished Business

Like teenagers wincing through a hated homework assignment, the Pentagon spent last fall devising its plan for trimming more than $450 billion in future budget growth. Everything from the size of the Army to the weapons they buy and how the Pentagon does business can expect a “haircut,” planners announced in January, with lawmakers safely out of town.

In any other year, Congress would give the White House a fight over that figure alone. But there’s an even bigger number that scares everyone. Congress and the administration have less than one year (an election year, no less) to come up with something—anything—to dodge the dreaded “sequestration” bullet that requires roughly $600 billion in across-the-board cuts to defense spending. One former budget official estimates negotiators have until the end of summer before the Defense Department must prepare for things like employee furloughs and not bouncing checks for Afghanistan war suppliers.

Obama’s budget request will reflect his new strategy, which means more spending on fighting terrorism and modern threats using intelligence and drones, cybersecurity, and special-operations forces, while checking China’s efforts to keep U.S. ships far at sea—and less for a massive land war or counterinsurgency like Afghanistan.

While big-ticket items like the fabled F-35 fighter and Navy ships are on the table, DOD wants to downsize, station fewer troops overseas, likely raise health care rates, and tinker with skyrocketing benefits and retirement costs. Expect a heavy hand here by lawmakers and interest groups making sure the United States does right by its defenders.

Quietly, industry officials are waiting to see the Pentagon’s bottom line. Others aren’t: Boeing will eliminate its aircraft factory in Kansas and thousands of jobs, anticipating leaner years. Expect defense jobs to drive House GOP concerns—and arms industry lobbying.

Congress has taken the wheel on expanding sanctions for Iran. The House passed a new bill in December—the Senate Banking Committee is expected to introduce its own version—expanding sanctions against affiliates of Iran’s Revolutionary Guard Corps and ships that have passed through Iran, Syria, or North Korea.

“We expect that most, if not all, of the current provisions would still be reflected in the final draft,” said a knowledgeable Senate aide.

As for war, as U.S. officials seek peace with the Taliban, others are working on a long-term agreement for Afghanistan’s security that has NATO and others shouldering a great share of costs. The goals: Sign before economies worsen; devise the endgame for fighting by 2014, if not sooner; and get an Afghan agreement for a longer American presence. Defense Secretary Leon Panetta and Chairman of the Joint Chiefs of Staff Martin Dempsey want an agreement ready for May’s NATO heads-of-state summit in Chicago.

They’ll have to sell that to Congress, too, if anyone’s there to listen. One senior staffer said he expects key committee members will mostly be focused on another battle: campaigning.

TECHNOLOGY

All Things Cyber

Leaders in both chambers have promised to move forward with wide-ranging cybersecurity legislation this year. While the intent may be clear, the details remain murky.

Reid plans to bring comprehensive cybersecurity legislation to the floor during the first month of work. Various pieces of draft legislation have been making the rounds, and one of Reid’s senior aides said last week that the working groups, which are developing the bill, are on track to introduce legislation in a matter of weeks.

Potential proposals include clarifying the role and authority of government agencies to tackle cyberthreats, defining what “critical infrastructure” may warrant additional government protection, and finding ways to increase information sharing between the government and corporations.

While the Senate plans to tackle cybersecurity in a comprehensive bill, the House may be taking a more roundabout approach. In October, the House Republican Cybersecurity Task Force proposed developing smaller pieces of legislation in the various standing committees, which could be packaged into a larger bill.

“We are generally skeptical of large, ‘comprehensive’ bills on complex topics, at least as the bills are being written,” the task force wrote in its report.

House members have proposed several bills, including one from House Intelligence Committee Chairman Mike Rogers, R-Mich., that aims to allow the government to share more information with businesses. Another measure, in the House Homeland Security Committee, addresses cybersecurity authority among federal agencies and outlines ways to protect “critical infrastructure”—such as power grids and water systems—from cyberattacks.
But the Homeland Security Committee’s senior counsel, Kevin Gronberg, said it is unclear what will happen to the legislation if it is approved by the committee.
Congress will also continue work in the second session on legislation that would free up more spectrum to meet the public’s growing demand for wireless technologies.

The spectrum legislation is likely to be part of the larger debate over whether to pass a one-year extension of the payroll-tax holiday. The House included spectrum legislation in last month’s payroll-tax package. Some conferees are key spectrum debate players, including Upton; Energy and Commerce ranking member Henry Waxman, D-Calif.; and Rep. Greg Walden, R-Ore., chairman of the Communications and Technology Subcommittee. Congressional leaders will have to decide whether to stick with the House Energy and Commerce GOP bill, which most of the panel’s Democrats opposed, or include provisions from the bipartisan spectrum legislation approved last summer by the Senate Commerce Committee.

Kevin Baron, Amy Harder, Stacy Kaper, Meghan McCarthy, Josh Smith, and Sara Sorcher contributed contributed to this article.

This article appears in the January 23, 2012 edition of NJ Daily.

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